Amazon overbuilt warehouses during the pandemic, forcing the internet retail giant to scale back its logistics footprint. But it’s still expanding in one particular area: warehouses for long-term inventory.
In recent weeks, Amazon has been inviting some sellers to a new beta program called “Amazon Warehousing & Distribution,” according to a copy of the invitation seen by Insider. AWD uses warehouses designed to store slower-moving products that need long-term storage. Sellers typically keep this inventory in their own warehouses or other facilities before shipping them to Amazon’s fulfillment centers that have stricter storage limits and faster turnover requirements.
AWD has no storage limits and automatically sends products to Amazon’s regular fulfillment centers when inventory is running low, according to the invitation. It comes with a pay-as-you-go pricing plan that is nearly half the rate of Amazon’s regular fulfillment service, and works for storing non-Amazon orders as well.
An Amazon spokesperson didn’t respond to a request for comment. VP of Distribution and Fulfillment Solutions Gopal Pillai announced the program in a blog post Wednesday, after Insider asked for comment about it.
The launch of AWD signals Amazon’s ambition to handle a bigger piece of the fulfillment process. Amazon’s current warehouse network largely caters to fast-turning, Prime-eligible products and charges higher fees for long-term storage of inventory that doesn’t move quickly. The new AWD warehouses can fill the void by covering the slower-selling products and even off-Amazon items.
“Amazon is likely trying to say, ‘Just send us everything — let us sort out where it should be stored regardless of channel,” Rick Watson, CEO of RMW Commerce Consulting, told Insider. “They want to be your only supply chain provider.”
Watson called AWD a “system of feeder warehouses” for slower-moving goods that can quickly ship to Amazon’s main fulfillment centers. AWD warehouses are the “intermediate” facilities where sellers initially keep their inventory before moving them to Amazon’s costly fulfillment centers that are reserved for the fastest-moving products and are located closer to consumers. He likened it to the different types of data storage options available from the Amazon Web Services cloud unit, which offers a variety of services depending on performance and frequency of use.
“They are bringing this [AWS] idea to their supply chain services,” Watson said. “I would predict Amazon over time introduces more tiers of warehouse storage.”
One important aspect of AWD is that it accepts inventory for off-Amazon products as well. That means merchants who sell on other marketplaces or through their own websites can store their inventory at AWD warehouses. It could also help more sellers join Buy with Prime, a major initiative Amazon launched this year that lets non-Amazon merchants sell Prime-eligible products on their own sites, Watson said.
Some sellers are not sold yet. Judah Bergman, an Amazon seller who’s been invited to AWD, told Insider that Amazon has been testing AWD for the past year under a different name called “Amazon Upstream Storage,” and it appears to be significantly expanding the program. While AWD could help streamline the fulfillment process, Bergman said he’s unlikely to sign up because he doesn’t want to lock his entire supply chain under one company’s logistics network. He currently uses a mix of storage and fulfillment options, including Walmart’s own service.
AWD could also potentially help Amazon make use of the empty warehouse spaces it’s left with, if it retrofits its fulfillment centers to become AWD-compatible. The excess warehouse capacity has been a major headache for Amazon, prompting the company to scale back expansion efforts and sublet up to 30 million square feet of warehouse space, according to Bloomberg and the Wall Street Journal.
Work at Amazon? Got a tip?
Contact the reporter Eugene Kim via the encrypted-messaging apps Signal or Telegram (+1-650-942-3061) or email (ekim@insider.com).
Keep reading
For you